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Putting your money where it’s safe

I frequently hear this question from depositors and family members today just as I did in June of 2009, when I originally addressed those issues. Everyone wants to know if their money is safe at their bank. The two primary issues to consider here are whether or not your bank is a member of the FDIC and how your bank’s financial health and stability are rated within the financial community.

In May of 2009, President Obama signed the Helping Families Save Their Homes Act in an attempt to stabilize the nation’s housing and financial markets. The legislation temporarily increased the standard maximum deposit insurance amount from $100,000 to $250,000 per depositor through December 31, 2013. Since then, the maximum deposit insurance amount of $250,000 per depositor has become permanent.

Additionally, in order to provide some level of comfort and safety to businesses during the recession, the FDIC implemented the Transaction Account Guaranty Program (TAGP) which provided unlimited coverage on low interest and non-interest bearing checking accounts. This FDIC program is expiring on December 31, 2010, but will be extended by the Dodd-Frank Act through December 31, 2012.

A major difference between the two programs is that the new program will not cover low interest rate checking accounts; only those that are traditional non-interest bearing checking accounts will have unlimited coverage. However this coverage is in addition to the $250,000 standard coverage per depositor.

So now, regardless of whether your account is at a large or small bank, you can be certain of the safety of your money if you make sure that you bank with an FDIC insured institution and if you maintain the total amount per depositor within the FDIC’s prescribed limits.

You can go to the FDIC website – www.FDIC.gov – to check your limits with “Edie the Estimator” service. Edie will calculate your FDIC insurance coverage for each bank where you have deposit accounts. After a few minutes of processing, a printable report lets you know whether your deposits are within or exceed coverage limits.

A number of independent bank rating firms such as BauerFinancial – www.bauerfinancial.com – also monitor the stability of the nation’s financial institutions. The firm’s mission statement points out that “no institution pays for its rating, nor can it be eluded.” I highly recommend checking their website and seeing how your bank measures up.

Fred Dawson, Jr. is the executive vice president and chief credit officer for Commerce Bank of Arizona, an Arizona based community bank specializing in serving small to mid-size businesses in Arizona. Fred may be contacted at (520) 325-5200, or fdawson@commercebankaz.com.